Dec. 18 (Bloomberg) -- The Ohio State University President
E. Gordon Gee lives in a 9,630-square-foot Tudor Revival mansion
that was renovated for him, featuring a great hall, pool,
elevator and tennis court.

Gee made $1.9 million last year as the highest-paid public
university president in the U.S. He also logged $1.7 million in
expenses in fiscal 2011, including trips in private jets,
country club dues and fundraising parties at his residence.

“He’s overpaid,” said CJ Jones, 19, a junior public
affairs major at Ohio State, whose tuition has risen 9.7 percent
during her 2 1/2 years at the university, based in Columbus, the
state capital. “You should want that job for a sense of Buckeye
pride. Why do you have to suck so many resources from our
budget? I know kids graduating from OSU with $90,000 in debt,
and it’s a public university.”

Gee was among 47 administrators, athletic officials and
hospital faculty who earned more than $1 million in 2011,
according to payroll records compiled by Bloomberg for about
216,000 employees at flagship universities in the 12 most
populous states. Much of the compensation came from non-public
sources. Gee’s expenses and home renovations weren’t funded with
taxpayer dollars, and his performance justifies his
compensation, said Gayle Saunders, a university spokeswoman.

Salaries for the highest-paid public university employees
from California to Virginia rose as state appropriations per
student fell to the lowest in a quarter century, faculty pay
stagnated and the default rate on student loans hit a 15-year
high. Record expenses for higher education are prompting
lawmakers to scrutinize how the institutions spend their money.

Pay ‘Mythology’

“There’s a mythology promulgated by people in
administration that you have to pay competitive salaries to
attract the best people,” said Benjamin Ginsberg, political
science professor at Baltimore-based Johns Hopkins University
and author of a book detailing how universities are adding
administrators even as state funding drops. “In point of fact,
no one can show there is any relationship between what these
people are paid and the quality of the work they do.”

The public-university data show that top administrators,
coaches and hospital physicians continue to enjoy compensation
far above that of the best-paid state employees outside higher
education, even as rising tuition squeezes the middle- and
lower-class students the institutions are meant to serve. And as
officials complain that declining funding from cash-strapped
states is forcing them to raise student tuition and fees,
university endowments continue to grow.

Best Paid

The data provide previously undisclosed detail about how
much university employees earn and where the money comes from.
Unlike other state employees, the best-paid workers in higher
education derive some or all of their compensation from non-public revenue such as endorsement deals with product makers,
radio and television appearances and speeches for coaches,
patient fees for doctors, and donor gifts and endowments
targeted for coaches and top administrators.

Yet a significant share of other university employees’
compensation does come from taxpayers, the data show. According
to a Sept. 12 presentation by University of California Provost
and Executive Vice President Aimée Dorr to the Board of Regents,
97 percent of the faculty in the system receive at least a
portion of their salary, benefits and retirement from a
combination of state funding and tuition.

Universities Compared

Data compiled by Bloomberg as part of a review of public
employee pay in the 12 biggest states includes these flagship
institutions: Ohio State; the University of California at Los
Angeles; Florida; Texas; Michigan; Virginia; Penn State;
Illinois at Urbana-Champaign; North Carolina at Chapel Hill;
Stony Brook in the State University of New York System; the
Georgia Institute of Technology and Rutgers, The State
University of New Jersey. All are members of the Association of
American Universities, a group of 62 research schools.

The highest-paid at those universities last year was
William “Mack” Brown, coach of the University of Texas
Longhorns football team, who reaped $5.3 million, as funding per
bachelor degree at the university fell to last among a group of
schools tracked by the Fort Worth-based Texas Coalition for
Excellence in Higher Education.

About $2.7 million of Brown’s compensation comes from
athletics revenue, with $2.6 million from donor gifts
specifically designated for coach salaries, according to figures
provided by his university.

Brown’s pay is comparable to other top-tier coaches,
university President William Powers Jr. said in a statement.

Winning Record

“Mack’s 147-41 record, four BCS appearances, two national
championship game appearances and 2005 national championship
have directly driven the Athletic Department’s increased
revenue, more than $30 million of which has been used for
academic programs, facilities, faculty and libraries since
2005,” he wrote.

The highest-paid public university doctor among the 12
states was employed at Ohio State, with total compensation of
about $2 million: Steven Kalbfleisch, a cardiologist and
professor of clinical medicine, who came to the university
hospital six years ago from a competing hospital with four
colleagues as Ohio State sought to establish a world-class
heart-care program.

Kalbfleisch, co-author of a book called “The Pocket Guide
for Cardiac Electrophysiology,” had regular pay of $658,000,
plus $1.38 million in deferred compensation related to his move
from the rival hospital, Riverside Methodist. All his
compensation came from patient revenue, according to a breakdown
provided by the university.

Deferred Compensation

The deferred compensation was from five years as a one-time
payout last year, a medical center spokesman, David Crawford,
said. Besides his clinical research, teaching and practice
responsibilities, Kalbfleisch is director of the medical
center’s electrophysiology lab and does outreach on behalf of
the center at hospitals around Ohio, Crawford said.

Ohio State president Gee’s base salary of $834,530 is
derived from public funds, including tuition, fees and state
appropriations, as is $225,000 in deferred compensation that is
payable after completion of his term and $100,500 in retirement
benefits, according to a breakdown provided by university.

Tuition Rises

As tuition rose by 3.3 percent at Ohio State in the
2011-2012 school year, and 3.1 percent in 2012-2013, Gee got
raises. During his annual review, The Ohio State University
Board of Trustees voted Nov. 9 to increase his salary by $25,036
and approved performance compensation of $333,812. In 2011,
trustees increased Gee’s salary by $16,363 and allotted him
performance compensation of $143,179. Both performance increases
came from non-public funds.

Gee’s also enjoys perks not received by other public
officials. He lives rent-free in a fully staffed house. He rides
private jets, including a $7,191 flight covering the 107 miles
(172 kilometers) from Columbus, Ohio, to Cincinnati, according
to expense reports obtained by Bloomberg. He billed the
university for everything from $2,427 for a cabin upgrade during
a 2008 alumni cruise in the Baltics to vitamins. School
officials said Gee’s expenses are paid by endowments or other
non-public discretionary funds, not by tuition or tax dollars.

The Dayton Daily News wrote about Gee’s expenses in
September after obtaining records from the university.

Gee’s fundraising prowess is part of what makes him so
valuable, said Saunders, the university spokeswoman.

‘Instrumental’ Leader

“President Gee is one of the most experienced and
respected leaders in higher education, having served as a
university president for more than 30 years,” Saunders said in
an e-mail. “He has been instrumental in moving Ohio State from
an excellent public higher-education institution to the eminent
model for what public higher education should be for the state
and the nation.”

“Since arriving in 2007, President Gee has helped raise
$1.6 billion,” she said. “In addition, he has worked to secure
$1 billion in new resources over the past two years and has been
recognized as a leader in finding alternative revenue to support
students, faculty and staff.” Last year, Ohio State became the
first public university to issue 100-year bonds to raise money
for capital projects, Saunders said.

Earning Less

The top-paid public school administrators earned less in
2011 than their counterparts at some private institutions. The
highest-compensated private school president in 2010, the latest
year for which figures were available, was J. Robert Kerrey,
former head of New York’s New School, whose total compensation
was $3.05 million, according to a survey published this month in
the Chronicle of Higher Education. Second place fell to Shirley
Ann Jackson, president of the Troy, New York-based Rensselaer
Polytechnic Institute, who earned $2.3 million in 2010, the
report showed.

As they watch college debt mount, there’s a growing
awareness among Ohio State students that Gee makes more than
some of his public-university peers, said Thomas Lee, a recent
graduate of Ohio State and an organizer at the Ohio Student
Association, a student advocacy group. In 2011, students held
sit-ins on campus and marched on Board of Trustee meetings
protesting tuition increases.

Employees at other public universities, including those not
serving in top management positions, also were well-paid last
year. More than 1,900 workers at the dozen flagship schools made
more than $300,000 in 2011, while 324 of them made more than
$500,000, the Bloomberg data show.

Some of the 12 universities paid far better than others,
the data show. For example, about 576 UCLA employees earned more
than $300,000 in 2011. At Michigan, 445 public servants reaped
more than $300,000; at Florida, 221; at Texas, 102; and at
Rutgers, 33, according to the data.

Top Earners

Top earners at Illinois, which served a similar number of
students last year as UCLA, collected far less than their
counterparts on the West Coast. The highest-paid at the
University of Virginia and at North Carolina also brought in
less than their peers at UCLA and Ohio State.

As state appropriations dwindled, endowments at all 12
universities reported gains in 2011 -- in most cases by 10
percent or more, according to a survey by the Washington-based
National Association of College and University Business
Officers, an organization of higher education providers and the
Wilton, Connecticut-based Commonfund Institute, an institutional
investment firm. UCLA’s endowment posted the biggest gains, with
a 49 percent jump to $1.5 billion in fiscal 2011 from $995
million in fiscal 2010, the survey found.

Higher Tuition

With student debt increasing to pay for higher tuition and
fees resulting from falling state funding, momentum is building
in Congress to compel universities to spend endowments to help
struggling pupils.

“Universities are wholly incapable of controlling their
costs,” said Dean Zerbe, an attorney who helped U.S. Senator
Charles E. Grassley, an Iowa Republican, scrutinize college
spending. “Endowments continue to grow, and there is very
little spend-out. They could tax endowments, and we could raise
billions of dollars and give more Pell grants and use the money
to help poor children.”

As the schools complain about declining revenue from the
states, they also benefit from tax breaks that companies and
individuals don’t get. Exemptions include tax-free charitable
donations, tax-free endowments and billions in federal research
grants that indirectly subsidize salaries for the university
officials, Zerbe said.

Donor Gifts

Some states limit the percentage of university executive
pay that can come from public funds, forcing institutions to use
money from donor gifts and endowments to pay a shrinking pool of
talented administrators what the market demands, said Raymond D.
Cotton, a Washington-based lawyer with Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo PC who specializes in presidential
contracts.

Texas law limits public allotments for president’s pay to
$78,000 and Florida caps its compensation at $225,000, he said.
Data compiled by Bloomberg reflects this, with Powers, the Texas
president, earning $65,945, or 10 percent, of his $613,612
salary in 2011 from state appropriations and the remainder
provided by endowments.

Escalating pay for public university presidents in
California -- particularly a decision by University of
California Regents to pay the incoming UC Berkeley chancellor a
base salary of $486,000 -- prompted state Senator Leland Yee, a
Democrat, to reintroduce a bill on Dec. 3.

Foundation Money

The measure would prohibit executive pay increases using
state or foundation money at the UC or California State
University systems within two years of a budget year in which UC
or CSU did not see an increase in their state budget allocation.
Yee introduced the bill twice before. Last session it died in a
legislative committee.

“Every time there were raises you would hear the regents
talk about raising tuition and fees,” Yee said. “It seemed as
if what was going on is that the students were paying for these
increases.”

As schools raised administrator pay, inflation-adjusted
published prices for tuition and fees at public four-year
universities increased by 5.2 percent a year, on average, from
2002-2003 to 2012-2013 -- a higher growth rate than either of
the two preceding decades, according to an October report by the
New York-based College Board Advocacy & Policy Center.

Over the past decade, costs to attend public universities
grew at more than twice the rate of those at private colleges,
which recorded a 2.4 percent annual gain -- lower than either of
the preceding 20 years, according to “Trends in College Pricing
2012.”

Diminishing Funding

Even as pay and endowments grew at many public
universities, their administrators complained about diminishing
funding from their states. In speeches, budget presentations and
newspaper editorials, university presidents said declining
appropriations forced them to make tough choices between saving
faculty jobs and upgrading half-century-old buildings.

“A severe backlog of facilities maintenance caused by the
elimination of state support has the university on the precipice
of crisis,” said University of Florida President Bernard Machen
in an April 25 statement, decrying a 25 percent decline in state
support, or $230 million, to the school by the legislature since
2007.

Machen Earnings

Machen earned $807,819 in 2011, fourth in total
compensation among his peers at the 12 universities. Athletic
officials at Florida ranked second and third in the database
overall, with men’s basketball coach Billy Donovan earning $3.6
million from April 2010 to April 2011 and football coach William
Muschamp pulling down $3.3 million from December 2010 to January
2012, according to contracts obtained by Bloomberg through a
public records request.

Machen declined to comment through Janine Sikes, a
university spokesman. Sikes said his compensation last year
included a $300,000 retention bonus for eight years and a
$75,000 retirement payment. Donovan and Muschamp declined to
comment through a spokesman for the Florida athletic department,
Steve McClain.

A shrinking pot of money to pay university employees --
whose compensation consumes more than half of most schools’
general-fund budgets -- is evident among custodians at UCLA,
said Adam Keigwin, chief of staff for Yee, the California state
senator.

“UCLA janitors are some of the lowest-paid maintenance
workers throughout the country,” he said. “You have these
individuals who are making millions more than at comparable
universities and then you have people doing the grunt work
making less than their peers at comparative universities.”

Custodian Pay

UCLA paid 876 custodians $24.5 million last year, or an
average of $27,961, the Bloomberg data show. Rutgers paid 573
custodians $19.5 million, for an average of $33,637 each.

University of California officials said they negotiated a
starting salary of $14.42 an hour for UCLA custodians with the
American Federation of State, County and Municipal Employees.

Pay disparities among faculty and athletic officials caused
dissent at the University of Texas at Austin, where professors
protested when Brown -- the country’s second-highest-paid
college football coach, after Alabama’s Nick Saban -- received a
$2 million raise in 2009 amid cutbacks in academic programs.

“At a time when students are facing a deteriorating
academic environment in the form of declining class offerings
and increasing class sizes, and lecturers, teaching assistants
and staff are facing job terminations,” the faculty council
wrote in a resolution, “we believe a permanent raise of $2
million (a sum greater than the entire career earnings of a
typical university employee) offered to any member of the
university community is unseemly and inappropriate.”

Misplaced Priorities

Multimillion-dollar coaching salaries highlight misplaced
priorities at public universities at a time when boards should
focus on how to stretch thinning budgets, said Robert Atwell,
president emeritus of the American Council on Education.

“I find it reprehensible that coaches make as much money
as they do versus the faculty,” Atwell said. “People on the
governing boards at some of these institutions are known
primarily for their athletic priorities and it becomes a top
priority of the university.”

The balancing act between finding money to pay executives
what the market demands and dwindling state appropriations is
getting trickier, said Ronald Ehrenberg, a professor of
economics and director of the Higher Education Research
Institute at Cornell University.

Budget Squeeze

A good example of this phenomenon is the State University
of New York, he added. In the 1970s and 1980s, SUNY salaries
were among the nation’s highest, said Ehrenberg, who is a
trustee. As the state’s budget was squeezed over the past two
decades, salaries fell, he said.

Now compensation at the Stony Brook university is far lower
than at flagship schools in others states. Twenty-four of its
5,978 employees earned over $300,000 last year, including its
president, Samuel Stanley, who brought in $650,000, including a
$400,000 base salary and $250,000 in deferred compensation, the
data show.

Stanley makes about half as much as the university’s
highest-paid employee, Mark Stephen, a physician and medical
school faculty member who earned $1.2 million in 2011, records
show.

“Dr. Mark Stephen is a highly-trained spinal cord surgeon
who often treats badly injured and critically ill patients,” a
university spokesman, Lauren Sheprow, said in e-mail. “ He runs
a successful and active practice, from which the greatest
portion of his salary is derived.”

‘Fairly Compensated’

Stanley, she said, “is grateful to be able to work in a
job he loves, and believes he is fairly compensated.”

How much of medical personnel’s salaries is derived from
taxpayer funds varies between, and even within, schools. About 8
percent, or $89,506, of Stephen’s compensation came from public
money and $1.1 million from clinical practice, according to a
salary breakdown.

Medical personnel at Ohio State and UCLA were six of the
top 20 highest-paid university employees in 2011, according to
data compiled by Bloomberg.

Ohio State compares salaries at about 130 academic medical
centers when setting compensation for its doctors, said
Crawford, the medical center spokesman. The source of funding is
based on each employee’s role, with the majority coming from
patient revenue.

Public universities use a lower percentage of revenue to
provide services than nonprofit organizations do, and salaries
of administrators should be tied to performance, rather than
fundraising, said Robert E. Martin, emeritus professor of
economics at Danville, Kentucky-based Centre College.

“If they are going to get these salaries there must be a
link to their productivity and that does not exist,” Martin
said. “Most of them are being compensated for raising more
money rather than using the money they have wisely.”